The U.S. Court of Appeals for the Second Circuit has concluded that when a copyrighted work itself is considered to be news, dissemination of that work for public information purposes can be regarded as news reporting and receive immunity as fair use. The plaintiff, Swatch, a publicly traded company in Switzerland, held a private conference call with an invited group of outside financial analysts to discuss its 2010 earnings report that was just released. The entire conference call was recorded at the request of Swatch so that Swatch could make the recording available to other financial analysts who were unable to attend the call. The defendant Bloomberg is a financial news and data reporting service. Neither Bloomberg nor any other news organization was invited to Swatch’s conference call. Nevertheless, Bloomberg obtained a copy of the conference call recording as well as a written transcript of the call and made them both available online, without edits or comments. After Swatch sued Bloomberg for copyright infringement, Bloomberg asserted a fair use defense. The district court granted summary judgment to Bloomberg, dismissing Swatch’s claim on fair use grounds, and Swatch appealed. The Swatch Group Management Services Ltd. v. Bloomberg LP, Case No. 12-2412 (2d Cir., Jan. 27, 2014) (Katzmann, J.).

In affirming the fair use defense and the dismissal of Swatch’s copyright claim, the 2d Circuit deemed Bloomberg’s dissemination of the call recording to be “news reporting,” which constitutes a fair use of copyright material. Swatch contended that the recording was “data” rather than “news” and Bloomberg’s activity was data delivery rather than news reporting (noting that Bloomberg has described itself as providing both “news” and “data”). The 2d Circuit rejected this argument as making a semantic rather than factual distinction. The court stated that there can be no doubt that Bloomberg’s purpose in obtaining and disseminating the recording was to make important financial information about Swatch available to investors and analysts—a use that serves an important public purpose and, as such, is very closely analogous to “news reporting.”

The 2d Circuit also rejected Swatch’s argument that Bloomberg did not make any transformative use of the recording because it disseminated the recording without commentary or analysis. The court noted that a transformative use is not absolutely necessary for a finding of fair use and that in, the context of news reporting, the need to convey information to the public accurately may in some instances justify a defendant faithfully reproducing an original work rather than transform it. The court viewed that to be the case here because, by disseminating not just a written transcript but also the actual audio recording, Bloomberg was able to convey with precision not only what Swatch’s executives said, but also how they said it. This latter type of information, the court noted, is just as valuable to investors and analysts as the former, “since a speaker’s demeanor, tone, and cadence can often elucidate his or her true beliefs far beyond what a stale transcript or summary can show.”

Notably, the 2d Circuit distinguished this case from three prior cases cited by Swatch where the 2d Circuit rejected fair use arguments from defendants who purported to be serving the public by providing access to important financial information. In the first case, the defendant had simply translated the plaintiff’s Japanese business articles into English. In the second case, the defendant recounted the critical conclusions and predictions from the plaintiff’s research reports about major industrial and financial corporations. In the third case, the defendant had copied information about municipal bond redemptions compiled by a competing financial publisher. According to the 2d Circuit, the defendants in those cases appropriated works in which the plaintiffs had transformed raw financial information by compiling it from multiple sources or by mixing it with their own commentary and analysis. In this case, the statements captured in the recording, including the particular modes of expression used by Swatch’s executives, were themselves pieces of financial information. In other words, the earlier cases dealt with the appropriation of secondary sources that had compiled or commented on financial news, whereas this case concerns the use of a primary source that itself was financial news.

After affirming the “purpose and character” of Bloomberg’s use as “news reporting,” the 2d Circuit proceeded to address the remaining fair use factors, finding two of them also in favor of Bloomberg. Focusing on the “nature of the copyrighted Work,” the court determined the conference call recording to be a factual work which favors fair use and deemed the “unpublished” nature of the recording to be immaterial. In terms of the “effect upon the market for or value of the original,” the court found that the possibility that financial news or research organizations might be willing to pay to obtain this kind of recordings (in other words, Swatch might be able to earn licensing royalties for this kind of recordings) to be irrelevant because such possibility is not the reason for Swatch and other similarly situated companies to hold earnings calls. Rather, companies use earnings calls to disseminate financial information about their companies to investors and analysts. According to the court, by making the recording available to analysts who did not participate in the call, Bloomberg simply widened the audience of the call (drawing an analogy to the “timeshifting” fair use upheld in Sony—recording a television program in order to view it at a later time—which enlarges the television viewing audience and therefore would not impair the value of the plaintiffs’ copyrights).

In terms of the “amount and substantiality of the portion used,” the court conceded this factor did not favor Bloomberg since it used the entire recording. However, the court nevertheless concluded this factor to be “neutral”—neither favoring nor disfavoring fair use—because of the public interest in the information embodied in the recording. According to the court, copying a work in its entirety is sometimes necessary in the context of a fair use, which is the case here.